What Should a Dentist Expect from an Audit?

I am getting audited.

So step one, I am assuming one will get some kind of letter saying get ready to go through hell... but then what?It's only hell if you have poor record keeping skills and you're very disorganized. 

Does your CPA defend your books? Do you have to hire a tax attorney? Do you go to court?It depends. Some audits are mail; they simply want to see your back up for say - donations. Some are a little more extensive where you can do mail or a personal meeting or have them come to you (or your CPA) to go through the receipts.

It's up to you whether you want a professional involved. Many times human nature kicks in and people talk too much. They don't answer the question, they answer the question and then tell a story to boot or they answer a completely different question...or worse, they answer the question incorrectly....that's not to mean they lie, they simply say something they shouldn't or give WAY too much information.

About 2-3 years ago I had an agent that asked a lot of yes or no questions and I answered yes or no. They wanted me to talk my head off.... and it got to a point where they asked me to explain or describe something and I'd reply "can you be more specific", and at some point they'd ask a yes or no question 

If you get to a point on a deduction or a position where it gets difficult you may need a tax attorney and ONLY if something doesn't go your way and you've exhausted your appeals will you decide if tax court is necessary.

These questions may be stupid, but I have no idea how this works....

How many years does the IRS go back through one's books?Generally they can't go back more than 3 unless they believe fraud is involved.

How many years of receipts does one need to keep?We suggest 5 years of normal operating receipts and keep capital assets for as long as you own them and then 5 years from the year of sale.

I am wondering how expensive this can get...I am sure it depends on what they find....Correct and again, depends on how clean your records are and how organized you are. The more organized and complete your records are the lower the cost in most cases. Of course even with the best records if you took a position that gets challenged and disallow it and you believe in it, the more you fight it the more it costs.

In my experience the average cost of an audit that our clients have paid us is probably between $3k-$6k. Of course some can be handled easily for a few hundred dollars and some cost more than 6, usually due to poor records and risky positions on tax deductions.

This first appeared on Dentaltown.

For more information, please contact info@dentalcpas.com

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Job Hunting Tips for New Dental Graduates

This is a guest blog from our friends at ETS Dental.

The date is quickly approaching. Dental students will be graduating in May/June, and Dental Residents will be completing their programs in June. It is an exciting time. New jobs, possible relocation, and the beginning of a whole new life doing what you love to do.

If you are fortunate and have already found a great opportunity, then congratulations. Many future doctors, however, are still on the hunt. As an independent recruiter, who specializes solely in the dental industry (www.etsdental.com), I want to share with you some tips you may not hear often or at all.

Tips to consider:

1. Be open minded.  Dentistry is not the same as it was just 5 or 10 years ago, and it definitely is not the same as it was 15+ years ago.  Group practices are growing at an astounding pace, and a shear minority of new graduates start or buy practices immediately after graduation.
2. Don't base your decision only on what you hear from classmates.  It is great to bounce ideas and experiences off of each other, but here are a few points.  First, you are all in the same boat and have limited experience with what is out there in the job market.  Second, after graduation you are going in all sorts of different directions.  What doctors experience in New England are different that what you would experience in Texas.
3. Look at areas one or more hours outside of major cities.  Go suburban or rural. You will find some great opportunities with successful private practices. I speak with a large of number practice owners in these areas who are looking for new doctors interested in future ownership. Their practices are well established and continue to grow, but they really need an associate to keep up the pace. The challenge for these practices is their ability to promote the opportunity due to doctors not actually looking in these locations.
4. 35% of nothing is nothing!  Dentists for the most part get paid on a % of collections (or production).  High percentages are great if there is a strong patient base, great production, and a supporting owner or managing dentist.  You will be much better working for 28% of collections in a practice with a strong patient base and supporting owner over going into a practice paying 35% where you have to build your own patient base from nothing.
5. Contracts require negotiation.  When you get an offer it will come with a contract (most likely).  I would almost guarantee that it will not be 100% what you are looking for.  Don't just turn it down.  If the practice is what you want, and you have develop a good rapport with the owner (manager) you must ask for what you want.  Negotiating however is not one sided and you will have to give a little to get a little.  Compromise!

Written by Carl Guthrie, Western Region Recruiter for ETS Dental.  Contact Carl at cguthrie@etsdental.com | 540-491-9104 | www.linkedin.com/in/cguthrie |www.facebook.com/carl.guthrie | www.twitter.com/carlg_ets | www.etsdental.com

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The Five Signs of Economic Recovery

The world's developed economies may be set to emerge from several months of slowdown, led by the U.S. and Japan, according to the Organization for Economic Cooperation and Development. The Paris-based think tank said on Monday that its leading indicator of economic activity in its 34 member nations rose to 100.4 in December from 100.2 in November—the first increase in the measure since February 2011. That's great for a global view, but how can you tell if things are getting better in Maryland?

Mark Jensen, a partner at Bowie & Jensen, a leading business law firm's, transactional department. He has received numerous legal awards and most recently was named to SmartCEO's legal elite. He focuses his practice on the representation of privately held companies of all sizes, drawing on his personal experience and professional training to help his clients identify goals and develop strategies and tactics to achieve them.

"While these trends are purely anecdotal and based upon our regional practice with privately held companies, professionals and entrepreneurs, they do appear to be consistent with some of the national economic indicators, Mr. Jensen said. "Some of the pressure is gone, the fear is subsiding and business is getting just a bit easier."

Mr. Jensen says there are five clear signs of economic recovery that include:

1.     COMMERCIAL LENDING:

After a nearly three year drought, we have closed more traditional commercial loans in the last three months than we have in the previous thirty six months.  The terms are a bit more conservative, but they resemble pre-recession loans.  Money is actually being lent to people and businesses that need it for expansion and lines of credit.

2.     COMMERCIAL FORECLOSURES AND TROUBLED LOANS:

Beginning in the fall of 2008, Commercial Foreclosures and Troubled Loans ramped up to be a significant percentage of our practice.  We have only two that are still unresolved and have not been engaged to work on a new foreclosure or Troubled Loan in over two quarters.

3.     MERGERS AND ACQUISITIONS:

This practice area ground to a halt in the beginning of the great recession.  Starting in the end of 2009 we saw a relatively small level of activity virtually all driven by distress: a business on the ropes forced to do a deal or close up.  In the last three months we have seen a more traditional deal flow of arm’s length transactions: willing buyers and willing sellers working on a deal.

4.     COMMERICAL LEASING:

Since November, 2011 we have negotiated several Commercial Leases for clients who are moving to upgraded space because they want to and because they can.  This following on long periods of no commercial lease work, punctuated by distress moves to smaller and cheaper space.  Tenants are hiring interior designers again.

5.     EMPLOYMENT

From a steady flow of Separation Agreements for terminated employees we have recently began to see a surge in Employment Agreements for newly hired mid and senior level employees.

Mark Jensen is a close friend of ours. You can reach him at jensen@bowie-jensen.com 

Recent Dental Graduate has a Choice of Opportunities

I graduated back in May of 2011 and having been working as an associate for another dentist for the past 7 months. It has been a good associateship in the fact that he has allowed me to learn a ton about different procedures. The bad news is that there aren’t enough patients to support both him and me. My salary has kind of been a joke since I started and hasn't gotten any better. We had a conversation and he supports me going out to find another job. Plus my 200+k loans are just about due.

My two options are a dental mill that I recently interviewed for and is highly likely that I will get the job for. $500 a day minimum with a chance for production bonuses. Basically the stable, work like crazy, but get paid well associateship in a mill.

or....

This dental practice that recently came up for sale in the general area my family and I would like to live in. I saw the practice, like the location, and the dentist who is selling. I think it would be a great fit but am afraid to make the jump. So some specifics:
The information you post does look promising, however, you really have to dig deeper to make sure there’s truth in the verbal comments and surface info:

He works 3 1/2 days per week generating 530,896 in revenues.
Told me that about 40-50% of the revenue is brought in by hygiene.
Verify these comments: 40-50% is actually a pretty wide range, it means hygienist is between $210k and $265k and even at $225k that usually means $650kish in dentistry and $850k+ of total revenue. 1,200 patients do seem appropriate for approximately $225k of hygiene so that stat appears reasonable.

He's an older dentist has very conservative practice philosophy (told me that the has to "talk patients out of the things" instead of talking them into them
Again, you must dig into the statement. Get the production by provider by procedure reports to start.

Doesn't do any surgery or ortho (I like to do surgery and have gotten into Invisalign recently)
Over 1200 active patients (in a two year period) on 3 1/2 days per week with no external marketing.

Old equipment (as in about 30 years old but still functions well. He has it maintained once a month. I plan on slowly changing it out if I take over. Conventional x-rays.
In this situation you'll probably want to factor into your analysis the investment needed not only in the equipment but also furniture and decor.

He has 3 DH's (equaling 7-8 hygiene days a week)
Well that stat suggests hygienist production in excess of $250k so again, his statement of 40-50% hygienist production could be accurate.

2 DA's and 1 Front Office manager
Staff plans on staying on when he leaves.
Staff salaries seem a bit high at 30% of gross revenues
Staff wages as a percentage of revenue will be high IF the dentistry production is low, which his statements indicate, so that's not surprising. If this practice were grossing $850k+ your wage stats would drop in line quite nicely I bet.

He's asking 375k for the practice.
If you can verify that this practice is under-producing that could be a steal.

and 200k for the building. (building is optional and could be purchased in the future)
Total profit with addbacks, officers compensation and such is 196k, 169k, and 179k over the last 3 years.
Those appear to be good numbers and would easily support that purchase price even IF the revenue remained at $550kish. Still, you really need to dig to make sure the numbers are accurate.

Let me know what you think about these opportunities. I'm learning towards purchasing the practice but my wife isn't sure yet.  Feedback from everyone would be helpful. Let me know if you have any more questions about it. Thanks in advance.

Good luck.

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